Retiree benefits in Boca scrutinized

Council members study switch from pensions to 401 (k) to save money.

Boca Raton — Days after laying off 45 workers, the City Council began talking about what has historically been political poison - reining in pension costs.

Councilman M.J. "Mike" Arts touched off a discussion about the city moving away from traditional pension programs to what's more common in today's private sector, 401(k) programs.

"I know there's a contract process," Arts said.

But if the city didn't address the tens of millions it owes to retirees in coming years, it could bankrupt the city, he has said.

The issue was first brought up during the city's goal-setting session in April, and it's listed as a top priority in the proposed spending plan City Manager Leif Ahnell presented to the council Monday during a budget workshop.

Right now, projections show the city owes tens of millions in promised benefits to employees and former city workers that it can't cover unless changes are made. That could mean modifications to future salaries and benefits paid to general city employees, police and firefighters.

The city's police and general employees' union contracts expire Sept. 30. And next year, the firefighters' contract is up.

Negotiations have moved slowly to renew the police and general employees' pacts because of state-mandated budget cuts that forced the city to lay off employees for the first time in memory, city officials said.

Councilman Peter Baronoff wondered why pension plans for city employees are still the norm when many companies have done away with them as a way to save money.

Ahnell said government employees' wages traditionally lagged those in the private sector. So to keep employees, most government still offer a traditional pension plan. But the city could take steps to contain long-term costs, he said.

With the increase in life expectancy, an employee who retires at 50 could draw on a city pension for another half century, said Councilman Bill Hager.

"That's the reality of these liabilities," he said.

After the meeting, Ahnell said state law mandates traditional pension programs and many benefits for police and firefighters. Nonetheless, the city could find ways to save money through contract negotiations.

Ahnell told the council the city faces future budget shortfalls because expenses will continue to rise faster than property tax revenues because new state laws cap taxes. His calculations show Boca Raton already needs to make up $2.8 million for the following year. And that's even before voters go to the polls in January to decide whether to make further changes to the property tax system.

The council has two public hearings scheduled on the proposed budget in September.

Luis F. Perez can be reached at lfperez@sun-sentinel.com or 561-243-6641.